drawings in accounting

In accounting, the term “drawings” refers to money or goods taken by the owner from the business for personal use.

Let’s break it down clearly 👇

🔹 Definition:

Drawings are the withdrawals made by the owner from the business for personal purposes.
These can be in the form of:

Cash (e.g., taking ₹10,000 from the business bank account for home use), or

Goods (e.g., taking business stock for personal consumption).

🔹 Accounting Nature:

Drawings reduce the owner’s capital.

Therefore, it is not an expense of the business.

It is shown on the debit side of the capital account.

🔹 Journal Entry:

When the owner withdraws money or goods:

For cash drawings:

Drawings A/c Dr. ₹10,000
To Cash A/c ₹10,000
(Being cash withdrawn by the owner for personal use)


For goods drawings:

Drawings A/c Dr. ₹5,000
To Purchases A/c ₹5,000
(Being goods taken by the owner for personal use)

🔹 Effect on Financial Statements:

Balance Sheet: Reduces capital (shown as deduction from capital).

Profit & Loss Account: No direct effect (since it’s not a business expense).

🔹 Example:

If Mr. Ravi started a business with ₹1,00,000 and during the year withdrew ₹10,000 for personal use:

Capital at start = ₹1,00,000
Less: Drawings = ₹10,000
➡️ Closing Capital = ₹90,000

🔹 Formula:
Closing Capital = Opening Capital + Profit - Drawings